We use cookies to customise content for your subscription and for analytics.If you continue to browse Lexology, we will assume that you are happy to receive all our cookies. For further information please read our Cookie Policy.

Government budget session adjusts dividend tax

In its budget session held at the end of August, the government reached an agreement on its 2014 budget proposition. There are still no changes planned to the taxation of dividends paid to corporations.

As of the beginning of 2014, 85% of dividends paid to private individuals by listed companies will be subject to tax. Currently the taxable amount of such dividends is only 70%.

In the case of dividends paid to private individuals by unlisted companies, 25% of such dividends are considered taxable capital income up to an amount corresponding to 8% annual return calculated based on the mathematical value of the share and up to a maximum value of EUR 150,000. The amount of dividends exceeding the euro threshold is considered capital income subject to tax for 85% of its value. Dividends falling below that amount but exceeding the amount corresponding to 8% annual return are considered earned income subject to tax for 75% of its value.

Thus, the budget session decided not to abolish dividends taxable as earned income as had originally been planned in the government spending limits discussion. In addition, the tax exemption range is to be narrowed by one percentage point, and the taxable portion of the amount exceeding the exemption threshold is to be raised by five percentage points.

The government’s proposition is largely based on the decisions made in last spring’s spending limits discussion. The budget session mostly made adjustments only to dividend taxation, but as the autumn passes, changes could also be made to other taxation decisions, such as the interest deduction limits set for corporations. The government’s budget proposition was submitted on 16 September 2013, and will be debated in Parliament over the autumn.